403b Planning Case Study

Public school educators, including university professors and administrators, can save more pre-tax than any other public or private-sector employee.

That’s because educators are eligible for two retirement plans, both with unique catch-up options.

In 2020, educators can save $19,500 into a 403(b) and a 457 plan. Those 50 years of age or older can also contribute an additional $6,500 into one of the two programs.

The 403(b) catch-up allows educators with low 403(b) savings who have worked 15 years with the same employer to save an additional $3,000 per year for five years.

One problem with this catch-up is that any contributions over $19,500 are credited first against the 15-year rule, so a teacher aged 50 or older could use up their 15-year catch-up without knowing it.

The 457 plan has a more considerable catch-up. It allows eligible employees to contribute $37,000 per year for three years before their “regular retirement date.”

The 403(b) catch-up can be used in conjunction with the age of 50 catch-up and a 457 plan. However, the 457 plan catch-up cannot be used with the age of 50 catch-up, although the employee could still contribute to a 403(b).

Not everyone can afford to save the maximum; however, it is good to know that educators have a well-deserved potential benefit.

Your school system provides you with a list of 403(b) companies. The 457 plan is different. The city/town usually provides one company. Both typically give you a broad range of investment options.

Social Security When Should You Start Taking It?

Sign Up Today For a 403(b) Plan and Start Paying Fewer Taxes Tomorrow

Since 1990, I’ve been a financial advisor specializing in helping educators set up, invest in, and service their 403(b) plans.

I have accumulated a reservoir of knowledge on the retirement system, the social security offset/windfall elimination, 403(b) plans, and other financial issues specific to public employees.

State and Local Pensions (Maybe Rhode Island Figured it Out?)

Because I am an independent financial advisor who provides flexible payment options (fee-only, hourly rate, or commission), I can work with most companies in your school system’s 403(b) plan. A partial list of companies I work with includes Fidelity, American Funds, Putnam, MFS, Aspire, Security Benefit, Axa, and Oppenheimer.

More About Tim

I will provide expert and highly personalized financial planning, retirement planning, and wealth management from my Boston office, when you need an independent financial advisor in Massachusetts (Greater Boston, North Shore, South Shore, South Coast, Merrimack Valley, MetroWest, or Rhode Island, Providence, Newport.)

These are the opinions of Tim Hayes and not necessarily those of Cambridge Investment Research. They are for informational purposes only and should not be construed or acted upon as individualized investment advice. 

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